Warm weather helps Target deliver Q1 comps growth

MINNEAPOLIS — April same-store sales at Target increased 1.1% and helped the company achieve a 5.3% first-quarter comps increase that was the highest in six years. How much of the performance was due to record warm weather versus good execution of a solid strategy against the back drop of an improved economy is debatable.

The 1.1% April comp wasn’t very impressive, unless of course you take into consideration the shift in Easter, which fell earlier this year and caused a portion of the sales related to the holiday to fall into March. That made for some wacky comparisons when viewed monthly basis. For example, in April 2011 the company reported a 13.1% comps increase. Given the magnitude of that increase, a 1.1% gain this year looks pretty good even though it is a lighter number, compared with the February and March figures when exceptionally warm weather drove sales.

“We’re very pleased with Target’s strongest quarterly comparable-store sales performance in more than six years, which, as we’ve previously indicated, received an early-season boost from the combination of warm weather and an earlier Easter,” Target chairman, president and CEO Gregg Steinhafel said. “Target’s underlying sales trend remains quite healthy, as guests respond to a unique combination of fashion and great prices, combined with the convenience and value created by our remodel program and 5% REDcard Rewards.”

It’s good to see Steinhafel acknowledge that weather played a role in the company’s performance because it is far from clear whether the pace of sales activity is sustainable given larger trends in the overall economy. The other great unknown is to what extent ridiculously warm weather pulled forward consumer demand so that shoppers now don’t need to buy some of the stuff they would normally buy in the later spring and summer months. Given these variables, Target said it expects May same-store sales in the low- to mid-single digits.

As for April, once again comps were strongest in food, health and beauty and other household essentials.

Delhaize sees revenues slide in Q1

SALISBURY, N.C. — Delhaize America, the U.S. division of Delhaize Group, reported a decline in its underlying profit declined due to a decrease in gross margin resulting from price investments, as well as the impact of closed stores, as part of the company’s portfolio optimization.

Revenues for the first quarter slid 1.2% to $4.6 billion, the company said, noting that when excluding the impact from the 126 stores the company closed in February, total U.S. revenues instead increased 0.7%. Comparable-store sales evolution declined 0.6%, the company said.

At the end of March 2012, Delhaize Group operated 1,541 supermarkets in the United States, a decrease of 94 stores, compared with March 2011, due to the closing of 126 stores earlier this year, partly offset by the expansion of Bottom Dollar Food, which Delhaize America said continued to experience strong revenue growth and that the Philadelphia and Pittsburgh markets "have generated revenues above [our] expectations." Delhaize America also noted that Food Lion’s brand repositioning is moving ahead with "accelerated momentum," as comparable store sales growth and volume growth were 2.9% and 1.8%, respectively, for its phase-one stores. Phase-two stores, which include 250 locations in Norfolk, Richmond, Roanoke and Lynchburg, Va., markets that launched in late March, also enjoyed significant increases in both sales and transactions. Phase-three of the banner’s brand repositioning, which consists of approximately 260 stores, will be launched on schedule by the end of the summer.

Commenting on the results, Delhaize Group CEO Pierre-Olivier Beckers said the company continues to deliver its New Game Plan and remains committed to price competitiveness, particularly for the company’s Food Lion banner, "with the progressive rollout of our brand repositioning."

“These actions and the current trading environment translated into lower underlying operating profit in the first quarter of 2012," Beckers said. "In order to fund our long-term growth initiatives and to further invest in our prices in several of our markets, particularly the U.S. and Belgium, we will increase our focus on the generation of free cash flow through a more disciplined approach to capital expenditures and improvements in working capital."

Rite Aid’s total, same-store sales increase in April

CAMP HILL, Pa. — Rite Aid reported a 2.9% increase in same-store sales for the month of April, the company said in a monthly sales report Thursday.

The boost included a 2.7% increase in front-end comps and a 3% increase in pharmacy comps, as well as a 3.8% increase in script count. Total drug store sales for the period, which ended Saturday, were nearly $2 billion, a 2.5% increase over the $1.95 billion reported in April 2011.

For the year so far, comps increased by 3.3%, including a 3.6% increase in front-end comps and a 3.1% increase in pharmacy comps, along with a 3.2% increase in script count. Total drug store sales for the eight-week period were about $4 billion, a 2.8% increase over the $3.9 billion reported last year.

The 4,658-store chain also announced that it would buy $405 million in 9.375% senior notes due 2015, which prompted Moody’s to raise the company’s credit rating from Caa2 to Caa1, according to published reports. The company announced in February a plan to refinance its debt by offering $481 million in 9.25% senior notes due 2020, using the proceeds to buy back its 8.625% senior notes due 2015.

Also on Thursday, the Jean Coutu Group, which owns nearly 20% of Rite Aid, announced its fourth-quarter and fiscal year 2012 results. For the fourth quarter, which ended March 3, the company had sales of C$737.2 million and profits of C$62 million, compared with C$659.8 million and C$46.5 million in fourth quarter 2011. For fiscal year 2012, the company had sales of C$2.73 billion and profits of C$230 million, compared with C$2.6 billion and C$182.6 million in fiscal year 2011.

Last month, Jean Coutu announced it had reduced its stake in Rite Aid by 24%, selling 56 million of its 234.4 million shares and reducing the number of representatives on Rite Aid’s board from three to two.

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